A Free-Market Energy Blog

Several months ago, renewable energy advocates hailed a poll as unquestionably demonstrating the public’s support of renewable energy resources. However, answers to follow-up questions showed that the public’s willingness to pay for increased renewable energy is lukewarm at best. Therein lies the fickle support for government-dependent energy path that shines is one thing in the abstract and another in the real world.

The Financial Times/Harris poll, conducted online by Harris Interactive, surveyed household members who pay the energy bill each month in France, Germany, Great Britain, Spain, Italy, and the U.S. between September 15 and 21, 2010. They were asked three questions about their support of renewable energy.

Question 1: More Wind

The first question was, “How much do you favour or oppose a large increase in the number of wind farms in [your country]?” The expected strong support was evident with 87% of U.S. respondents marking either “favor more than oppose” or “strongly favor”; Europeans responded with similarly high percentages.

Without context, some advocates concluded the poll results were a public mandate for wind farms. Peter Kelley, a spokesman for the American Wind Energy Association (AWEA), said in The Hill (October 28): “There are few things in this world that get 87 percent of support from the American public.” He then asserted that a national renewable electricity standard (RES) would lower energy bills by driving down the cost of natural gas. “When asked whether they want to pay more, well, they don’t have to pay more,” Kelley stated.

The story is the other wary around. New wind project start-ups in 2010 were a fraction of those in 2009 even with extremely favorable tax treatment. Why? Investors are migrating to more lucrative opportunities in other industries. The key reason wind installations are becalmed is not for lack of government mandates but because the price for natural gas is low. (Ask T. Boone Pickens.) After all, tax credits for investors aren’t particularly helpful unless your company is profitable.

In fact, AWEA yearns for gas prices at least in the $7–9/MMBtu range, the minimum at which wind farm development, with existing tax credits, become economically competitive. With gas prices expected to remain low for a number of years, AWEA’s only remaining option is to push a national RES that uses regulatory forces rather than market forces to spur growth.

Question 2: Extra Cost

The second question—“How much of an increase would you be willing to pay at the most, for energy if it were from renewable resources?”—adds context to the poll results. Among U.S. respondents, 34% answered “nothing more” and 17% said up to 5% more. It’s not surprising that everyone wants wind energy but few are willing to pay the freight. Should the cost of energy increase by 20%, the percentage of wind energy supporters nosedived to 5%. The percentages were even lower in Europe.

Implicit in these two questions is the assumption that wind farms are “clean” because they produce zero air emissions. This is not always a good assumption. The real emissions of any power generation technology can only be determined within the context of its effect within the larger and much more complex electricity grid in which it operates.

In west Texas, for example, it’s common now to have negative price periods during which suppliers actually pay grid operator ERCOT to take their power. This energy market distortion is caused by Production Tax Credit and Texas Renewable Energy Credit revenue that is solely based on the quantity of energy produced, not on when the energy is needed by the grid. Market data show instances when negative power prices have reached up to $35/MWh before wind farms were shut down, giving insight into the level of subsidies owners receive for that wind energy.

Proponents note that subsidies are meant to distort the market in order to achieve the greater good of clean energy generation. Perhaps, but this question remains: Are regions such as ERCOT’s west Texas actually operating at lower overall emissions with wind farms?

In the September/October issue of COAL POWER, a sister publication of POWER, the argument is raised that emissions actually increase on net with more wind farms. In the two-part report “Overblown: Wind Power on the Firing Line,” the author argues that because the majority of wind energy is produced off-peak, the net effect of wind farms running at zero to negative power prices at night is to cycle normally baseload coal-fired plants, causing a net increase in system emissions. Perhaps wind energy is not as clean as you expected.

Question 3: What Cost Premium?

The third and last question went to the heart of this clean energy tug-of-war: “The European Commission estimates it would cost each household an extra €150/£110/$220 on a monthly basis on gas and electricity bills to cut greenhouse emissions and get more renewable energy. Given the choice, how likely would you be to pay this extra €150/£110/$220 per month?” Predictably, only 12% of U.S. respondents answered that they were “completely” or “very likely” to make that choice; percentages were lower for European countries. In the U.S., 68% of respondents said they were “not at all likely” to pay that much extra; in European countries, the range was between 36% (Italy) and 77% (France). As for most of our U.S. readers, this surcharge would more than double my monthly electricity bill, so put me in the “not at all likely” category.

The problem with this last poll question is that it implies there is a choice in selecting renewable energy, when none exists. Rising energy costs will remain hidden on your monthly bill in the form of tax credits, building new gas-fired plants dedicated to chasing wind, system operating inefficiencies, and increased maintenance on existing fossil plants with what appears to be no discernable environmental benefit.

If people are so willing to pay more for renewable energy then why is the signup rate for “green” electricity so low. Folks like to talk about cleaner energy but, as you correctly assert, are not willing to pay for it.